Burning Rock Reports Third Quarter 2020 Financial Results

GUANGZHOU, China, Nov. 20, 2020 (GLOBE NEWSWIRE) -- Burning Rock Biotech Limited (NASDAQ: BNR, the “Company” or “Burning Rock”), a company focused on the application of next generation sequencing (NGS) technology in the field of precision oncology, today reported financial results for the three months ended September 30, 2020.

Recent Business Highlights

  • Early Detection. Validated a new version of ELSA-seq to expand from 3 cancer types (lung, liver, and colon/rectum) to 6 cancer types (esophagus, pancreas, and ovary added). This demonstrates Burning Rock's continued progress on its blood-based, pan-cancer early detection R&D.

    ° The new version of the ELSA-seq assay was able to detect more cancer types (liver, colon/rectum, esophagus, pancreas, lung, and ovary) at early stages (I-III), demonstrated higher specificity, and was able to predict the tissue of origin with high accuracy.

    ° The validation data was presented at ESMO Asia Virtual Congress 2020 ("ESMO Asia") in a mini oral presentation (Company presentation link here). At 99.5% specificity (95% confidence interval [95% CI] 96.7-100), the sensitivity from cross validation was 79.9% (95% CI 74.6-84.4). These results generally held in the pre-allocated independent validation set, which demonstrated 98.3% specificity (95% CI 95.8-99.4) and 80.6% sensitivity (95% CI 76.0-84.6). The results show a significant improvement of specificity compared to the earlier version of the test (presented in January 2020 at AACR Special Conference on Liquid Biopsy, poster link here), which showed 95.1% specificity (95% CI 91.2-97.4) and 80.8% sensitivity (95% CI 77.0-84.1).

    ° In terms of identifying the location of the malignancies, the test produced a tissue-of-origin result in 98.6% of cases, and 81.0% (95% CI 77.2-84.3) of these predictions were correct.
  • Therapy Selection. Analytical validation data of Magnis BR using a 520-gene tissue-based panel and a 168-gene liquid-based panel was presented at the Association for Molecular Pathology (AMP) Annual Meeting in a platform presentation (abstract number TT04). Magnis BR demonstrated comparable testing accuracy, superior library quality repeatability, and shorter turnaround time compared to manual library preparation approach.

    ° Magnis BR, Burning Rock’s fully automated NGS library preparation system, is a key component of Burning Rock’s strategy of empowering hospitals to run NGS tests in-house with minimized lab space and staff requirement. Its fully automated “walk-away” 9-hour overnight library preparation procedure enables hospitals to generate NGS reports in as quickly as 3 days.

    ° As China’s first and only capture-based fully automated NGS library preparation system, Magnis BR further strengthens Burning Rock’s competitive position in the important in-hospital testing market.
  • Licensed-in the Myriad myChoice® test into China on an exclusive basis for collaborative drug development studies and clinics.

    ° Highly synergistic with Burning Rock's existing testing platforms, leveraging Burning Rock's strengths in oncology NGS testing and commercial access.

    ° This test offers significant benefits to Chinese patients with myChoice® regarded as the ‘gold-standard’ for determining HRD status, as PARP inhibitors demonstrate increasing significance in a range of cancer types.

Third Quarter 2020 Financial Results

Revenues were RMB123.9 million (US$18.2 million) for the three months ended September 30, 2020, representing a 19.4% increase from RMB103.7 million for the same period in 2019, or a 28.8% increase compared to the average of 3Q19 and 4Q19. Sequentially, revenues increased by 15.8% from RMB107.0 million for the three months ended June 30, 2020.

  • Revenue generated from central laboratory business was RMB89.9 million (US$13.2 million) for the three months ended September 30, 2020, representing a 29.7% increase from RMB69.3 million for the same period in 2019, or a 20.5% sequential increase from RMB74.6 million for the three months ended June 30, 2020, primarily attributable to resumed volume growth of the Company’s central laboratory business. Number of patients tested in the central laboratory channel was 8,644 for the three months ended September 30, 2020, representing a 27.7% increase from 6,769 for the same period in 2019, or a 19.2% increase from 7,252 for three months ended June 30, 2020.
  • Revenue generated from in-hospital business was RMB31.7 million (US$4.7 million) for the three months ended September 30, 2020, representing a 3.3% increase from RMB30.7 million for the same period in 2019, or a 41.6% increase compared to the average of 3Q19 and 4Q19. Sequentially, revenue generated from in-hospital business increased by 14.9% from RMB27.6 million for the three months ended June 30, 2020. Number of contracted partner hospitals in the in-hospital channel increased to 25 as of September 30, 2020 from 24 as of June 30, 2020 and 19 as of December 31, 2019.
  • Revenue generated from pharma research and development services was RMB2.3 million (US$0.3 million) for the three months ended September 30, 2020, representing a 38.7% decrease from RMB3.7 million for the same period in 2019, due to declined pharma testing volumes.

Cost of revenues was RMB32.3 million (US$4.8 million) for the three months ended September 30, 2020, representing a 26.5% increase from RMB25.5 million for the same period in 2019, which was generally in line with the Company’s continued business growth.

Gross profit was RMB91.6 million (US$13.5 million) for the three months ended September 30, 2020, representing a 17.1% increase from RMB78.2 million for the same period in 2019. Gross margin was 73.9% for the three months ended September 30, 2020, compared to 75.4% for the same period in 2019.

Operating expenses were RMB216.2 million (US$31.8 million) for the three months ended September 30, 2020, representing a 93.5% increase from RMB111.8 million for the same period in 2019.

  • Research and development expenses were RMB69.3 million (US$10.2 million) for the three months ended September 30, 2020, representing an 81.1% increase from RMB38.3 million for the same period in 2019, primarily due to (i) an increase in staff cost of research and development personnel, and (ii) an increase in share-based compensation expenses for options granted to research and development personnel.
  • Selling and marketing expenses were RMB44.2 million (US$6.5 million) for the three months ended September 30, 2020, representing a 3.7% increase from RMB42.6 million for the same period in 2019.
  • General and administrative expenses increased significantly to RMB102.7 million (US$15.1 million) for the three months ended September 30, 2020 from RMB30.9 million for the same period in 2019, primarily due to (i) an increase in share-based compensation expenses for options granted to general and administrative personnel, and (ii) an increase in staff cost of general and administrative personnel.

Net loss was RMB127.1 million (US$18.7 million), compared to RMB32.2 million for the same period in 2019.

Cash, cash equivalents, restricted cash and short-term investments were RMB2.4 billion (US$353.8 million) as of September 30, 2020.

2020 Financial Guidance

The Company reiterates its 2020 full-year revenue guidance of approximately RMB420 million (US$61.9 million).

Conference Call Information

Burning Rock will host a conference call to discuss the third quarter 2020 financial results at 8:00 a.m. U.S. Eastern Time (9:00 p.m. Hong Kong time) on November 20, 2020.

Details of the conference call are as follows:

International: +65 67135090
U.S.: +1 8456750437
U.K.: +44 2036214779
Hong Kong: +852 30186771
China Mobile: 4006208038
China Landline: 8008190121
Conference ID: 5637209

A replay of the conference call will be available for one week (dial-in number: +61 2 8199 0299; same conference ID as shown above).

About Burning Rock

Burning Rock Biotech Limited (NASDAQ: BNR), whose mission is to guard life via science, focuses on the application of next generation sequencing (NGS) technology in the field of precision oncology. Its business consists of i) NGS-based therapy selection testing for late-stage cancer patients, with the leading market share in China and over 185,000 tissue and liquid-based tests completed cumulatively, and ii) cancer early detection, which has moved beyond proof-of-concept R&D into the clinical validation stage.

For more information about Burning Rock, please visit: ir.brbiotech.com.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “target,” “confident” and similar statements. Burning Rock may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Burning Rock’s beliefs and expectations, are forward-looking statements. Such statements are based upon management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Burning Rock’s control. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. All information provided in this press release is as of the date of this press release, and Burning Rock does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

 
Selected Operating Data
 
  For the three months ended
  March
31, 2019
  June
30, 2019
  September
30, 2019
  December
31, 2019
  March
31, 2020
  June
30, 2020
  September
30, 2020
Central Laboratory Channel:                          
Number of patients tested 5,336   6,047   6,769   7,576   4,680   7,252   8,644
Number of ordering physicians(1) 984   1,059   1,155   1,222   810   1,175   1,194
Number of ordering hospitals(2) 249   265   281   304   232   284   289
________________________  
(1) Represents physicians who on average order at least one test from us every month during a relevant period in the central laboratory channel.
(2) Represents hospitals whose residing physicians who on average order at least one test from us every month during a relevant period in the central laboratory channel.
  Asof
  March
31, 2019
  June
30, 2019
  September
30, 2019
  December
31, 2019
  March
31, 2020
  June
30, 2020
  September
30, 2020
In-hospital Channel:                          
Pipeline partner hospitals(1) 17   20   21   21   23   23   22
Contracted partner hospitals(2) 14   15   19   19   21   24   25
Total number of partner hospitals 31   35   40   40   44   47   47
____________________________  
(1) Refers to hospitals that are in the process of establishing in-hospital laboratories, laboratory equipment procurement or installation, staff training or pilot testing using the Company’s products.
(2) Refers to hospitals that have entered into contracts to purchase the Company’s products for use on a recurring basis in their respective in-hospital laboratories the Company helped them establish. Kit revenue is generated from contracted hospitals.
 
Selected Financial Data
 
  For the three months ended
Revenues March
31, 2019
  June
30, 2019
  September
30, 2019
  December
31, 2019
  March
31, 2020
  June
30, 2020
  September
30, 2020
   
  (RMB in thousands)
Central laboratory channel 72,807   63,394   69,304   70,749   46,141   74,607   89,899
In-hospital channel 26,557   16,329   30,704   14,088   17,123   27,588   31,704
Pharma research and development channel 5,101   5,090   3,716   3,838   4,065   4,776   2,278
Total revenues 104,465   84,813   103,724   88,675   67,329   106,971   123,881
  For the three months ended
Gross profit March
31, 2019
  June
30, 2019
  September
30, 2019
  December
31, 2019
  March
31, 2020
  June
30, 2020
  September
30, 2020
   
  (RMB in thousands)
Central laboratory channel 54,910   46,122   50,113   51,420   32,434   56,556   67,804
In-hospital channel 19,870   12,571   25,412   319   10,126   19,269   22,410
Pharma research and development channel 3,332   3,366   2,662   3,237   2,224   2,573   1,373
Total gross profit 78,112   62,059   78,187   54,976   44,784   78,398   91,587
  For the three months ended
Share-based compensation expenses March
31, 2019
  June
30, 2019
  September
30, 2019
  December
31, 2019
  March
31, 2020
  June
30, 2020
  September
30, 2020
   
  (RMB in thousands)
Cost of revenues 143   177   180   178     176   183   160
Research and development expenses 722   708   1,486   6,461     2,072   25,314   10,572
Selling and marketing expenses 364   517   485   (131 )   253   491   341
General and administrative expenses 429   537   1,149   9,387     1,665   1,639   57,805
Total share-based compensation expenses 1,658   1,939   3,300   15,895     4,166   27,627   68,878
 
Burning Rock Biotech Limited Unaudited Condensed Statements of Comprehensive (Loss) Income

(in thousands, except for number of shares and per share data)
 
    For the three months ended
  March
31, 2019
  June
30, 2019
  September
30, 2019
  December
31, 2019
  March
31, 2020
  June
30, 2020
  September
30, 2020
  September
30, 2020
  RMB   RMB   RMB   RMB   RMB   RMB   RMB   US$
Revenues 104,465     84,813     103,724     88,675     67,329     106,971     123,881     18,246  
Cost of revenues (26,353 )   (22,754 )   (25,537 )   (33,699 )   (22,545 )   (28,573 )   (32,294 )   (4,757 )
Gross profit 78,112     62,059     78,187     54,976     44,784     78,398     91,587     13,489  
                 
Operating expenses:                
Research and
development expenses
(31,427 )   (34,992 )   (38,278 )   (52,238 )   (40,016 )   (71,176 )   (69,330 )   (10,211 )
Selling and
marketing expenses
(26,690 )   (34,929 )   (42,606 )   (49,109 )   (29,815 )   (37,992 )   (44,174 )   (6,506 )
General and
administrative expenses
(31,565 )   (20,614 )   (30,866 )   (49,112 )   (34,295 )   (42,272 )   (102,731 )   (15,131 )
Total operating expenses (89,682 )   (90,535 )   (111,750 )   (150,459 )   (104,126 )   (151,440 )   (216,235 )   (31,848 )
Loss from operations (11,570 )   (28,476 )   (33,563 )   (95,483 )   (59,342 )   (73,042 )   (124,648 )   (18,359 )
Interest income 128     3,806     3,686     3,541     3,985     44     698     103  
Interest expense (4,210 )   (1,826 )   (1,650 )   (1,303 )   (1,178 )   1,939     (776 )   (114 )
Other (expense) income, net (176 )   (329 )   (37 )   (341 )   (151 )   122     (176 )   (26 )
Foreign exchange
(loss) gain, net
(101 )   1,142     800     (355 )   611     (118 )   (2,228 )   (328 )
Change in fair value
of warrant liability
64     (347 )   (1,403 )   (1,153 )   3,503     -     -     -  
Loss before income tax (15,865 )   (26,030 )   (32,167 )   (95,094 )   (52,572 )   (71,055 )   (127,130 )   (18,724 )
Income tax expenses -     -     -     -     -     -     -     -  
Net loss (15,865 )   (26,030 )   (32,167 )   (95,094 )   (52,572 )   (71,055 )   (127,130 )   (18,724 )
Net loss attributable to
Burning Rock Biotech
Limited’s shareholders
(15,865 )   (26,030 )   (32,167 )   (95,094 )   (52,572 )   (71,055 )   (127,130 )   (18,724 )
Accretion of convertible
preferred shares
(50,296 )   (41,770 )   (33,772 )   (39,173 )   (26,288 )   (38,400 )   -     -  
Net loss attributable to
ordinary shareholders


(66,161


)
 

(67,800


)
 

(65,939


)
 

(134,267


)
 

(78,860


)
 

(109,455


)
 

(127,130


)
 

(18,724


)
Loss per share:                
Ordinary shares - basic
and diluted
(2.86 )   (2.93 )   (2.85 )   (5.49 )   (3.15 )   (2.68 )   -     -  
Class A ordinary shares -
basic and diluted
-     -     -     -     -     -     (1.22 )   (0.18 )
Class B ordinary shares -
basic and diluted
-     -     -     -     -     -     (1.22 )   (0.18 )
Weighted average shares
outstanding used in loss
per share computation:
               
Ordinary shares - basic
and diluted
23,167,232     23,167,232     23,167,232     24,437,444     25,031,575     40,786,167     -     -  
Class A ordinary shares -
basic and diluted
-     -     -     -     -     -     86,479,686     86,479,686  
Class B ordinary shares -
basic and diluted
-     -     -     -     -     -     17,324,848     17,324,848  
Other comprehensive
(loss) income, net
of tax of nil:
               
Foreign currency
translation adjustments
(278 )   (14,288 )   45,317     (6,647 )   11,422     (2,336 )   (91,093 )   (13,417 )
Total comprehensive
(loss) income
(16,143 )   (40,318 )   13,150     (101,741 )   (41,150 )   (73,391 )   (218,223 )   (32,141 )
Total comprehensive (loss)
income attributable to
Burning Rock Biotech
Limited’s shareholders
(16,143 )   (40,318 )   13,150     (101,741 )   (41,150 )   (73,391 )   (218,223 )   (32,141 )
 
Burning Rock Biotech Limited

Unaudited Condensed Statements of Comprehensive (Loss) Income

(in thousands, except for number of shares and per share data)
 
  For the nine months ended
  September 30,
2019
  September 30,
2020
  September 30,
2020
  RMB   RMB   US$
Revenues 293,002     298,181     43,917  
Cost of revenues (74,644 )   (83,412 )   (12,286 )
Gross profit 218,358     214,769     31,631  
       
Operating expenses:      
Research and development expenses (104,697 )   (180,522 )   (26,588 )
Selling and marketing expenses (104,225 )   (111,981 )   (16,493 )
General and administrative expenses (83,045 )   (179,298 )   (26,408 )
Total operating expenses (291,967 )   (471,801 )   (69,489 )
Loss from operations (73,609 )   (257,032 )   (37,858 )
Interest income 7,620     4,727     696  
Interest expense (7,686 )   (15 )   (2 )
Other expense, net (542 )   (205 )   (30 )
Foreign exchange (loss) gain, net 1,841     (1,735 )   (256 )
Change in fair value of warrant liability (1,686 )   3,503     516  
Loss before income tax (74,062 )   (250,757 )   (36,934 )
Income tax expenses -     -     -  
Net loss (74,062 )   (250,757 )   (36,934 )
Net loss attributable to Burning Rock Biotech Limited’s shareholders (74,062 )   (250,757 )   (36,934 )
Accretion of convertible preferred shares (125,838 )   (64,688 )   (9,528 )
Net loss attributable to ordinary shareholders (199,900 )   (315,445 )   (46,462 )
       
       
       
Loss per share for class A and class B ordinary shares:
Ordinary shares - basic and diluted
(8.63 )   -     -  
Class A ordinary shares - basic and diluted -     (5.56 )   (0.82 )
Class B ordinary shares - basic and diluted -     (5.56 )   (0.82 )
       
Weighted average shares outstanding used in loss per share computation:
Ordinary shares - basic and diluted
23,167,232     -     -  
Class A ordinary shares - basic and diluted -     39,446,747     39,446,747  
Class B ordinary shares - basic and diluted -     17,324,848     17,324,848  
       
Other comprehensive income (loss), net of tax of nil:      
Foreign currency translation adjustments 30,751     (82,007 )   (12,078 )
Total comprehensive loss (43,311 )   (332,764 )   (49,012 )
Total comprehensive loss attributable to Burning Rock Biotech Limited’s shareholders (43,311 )   (332,764 )   (49,012 )
                 
 
Burning Rock Biotech Limited

Unaudited Condensed Consolidated Balance Sheets

(In thousands)
 
  As of
  December 31,
2019
  September 30,
2020
  September 30,
2020
  RMB   RMB   US$
ASSETS          
Current assets:          
Cash and cash equivalents 94,235   2,061,566   303,636
Restricted cash 4,009   263   39
Short-term investment 313,988   340,505   50,151
Accounts receivable 88,822   93,839   13,821
Contract assets 909   20,257   2,984
Amounts due from related parties 74,368   -   -
Inventories 58,116   69,805   10,281
Prepayments and other current assets 72,340   60,970   8,980
Total current assets 706,787   2,647,205   389,892
Non-current assets:          
Equity method investment 1,790   1,527   225
Long-term investment 38,369   37,456   5,517
Property and equipment, net 89,314   96,688   14,241
Intangible assets, net 343   3,455   509
Other non-current assets 10,954   16,162   2,380
Total non-current assets 140,770   155,288   22,872
TOTAL ASSETS 847,557   2,802,493   412,764
           
 
Burning Rock Biotech Limited

Unaudited Condensed Consolidated Balance Sheets (Continued)

(in thousands)
 
  As of
  December 31,
2019
  September 30,
2020
  September 30,
2020
  RMB   RMB   US$
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ (DEFICIT) EQUITY      
Current liabilities:      
Accounts payable 12,348     30,284     4,460  
Deferred revenue 49,539     67,109     9,884  
Capital lease obligations, current 4,893     5,300     781  
Accrued liabilities and other current liabilities 54,059     110,545     16,282  
Customer deposits 4,104     16,076     2,368  
Short-term borrowing 2,370     2,370     349  
Current portion of long-term borrowings 37,129     37,208     5,480  
Total current liabilities 164,442     268,892     39,604  
       
       
       
       
                 
       
                 
Non-current liabilities:      
Deferred government grants 991     263     39  
Capital lease obligations 4,816     787     116  
Long-term borrowings 18,266     -     -  
Warrant liability 23,503     -     -  
Total non-current liabilities 47,576     1,050     155  
TOTAL LIABILITIES 212,018     269,942     39,759  
       
       
       
       
                 
       
                 
Mezzanine equity:                
Series A convertible preferred shares 186,991     -     -  
Series B convertible preferred shares 466,983     -     -  
Series C convertible preferred shares 873,059     -     -  
Total mezzanine equity 1,527,033     -     -  
       
       
       
       
                 
       
                 
Shareholders’ (deficit) equity:      
Ordinary shares 31     -     -  
Class A ordinary shares -     114     17  
Class B ordinary shares -     21     3  
Additional paid-in capital 45,640     3,866,806     569,519  
Accumulated deficits (946,464 )   (1,261,682 )   (185,826 )
Accumulated other comprehensive income (loss) 9,299     (72,708 )   (10,708 )
Total shareholders’ (deficit) equity (891,494 )   2,532,551     373,005  
TOTAL LIABILITIES, MEZZANIE EQUITY AND SHAREHOLDERS’ (DEFICIT) EQUITY 847,557     2,802,493     412,764  
       
                 
       
                 
                 
 
Burning Rock Biotech Limited

Unaudited Condensed Statements of Cash Flows

(in thousands)
 
  For the three months ended
  September 30,
2019
  September 30,
2020
  September 30,
2020
  RMB   RMB   US$
Net cash used in operating activities (17,395 )   (37,052 )   (5,457 )
Net cash used in investing activities (25,684 )   (365,373 )   (53,814 )
Net cash used in financing activities (22,878 )   (20,939 )   (3,084 )
Effect of exchange rate on cash, cash equivalents and restricted cash 5,501     (81,043 )   (11,936 )
Net decrease cash, cash equivalents and restricted cash (60,456 )   (504,407 )   (74,291 )
Cash, cash equivalents and restricted cash at the beginning of period 185,740     2,566,236     377,966  
Cash, cash equivalents and restricted cash at the end of period 125,284     2,061,829     303,675  
       
  For the nine months ended
  September 30,
2019
  September 30,
2020
  September 30,
2020
  RMB   RMB   US$
Net cash (used in) generated from operating activities (177,905 )   17,116     2,519  
Net cash used in investing activities (368,922 )   (72,884 )   (10,734 )
Net cash generated from financing activities 570,643     2,097,242     308,891  
Effect of exchange rate on cash, cash equivalents and restricted cash 6,134     (77,889 )   (11,471 )
Net increase cash, cash equivalents and restricted cash 29,950     1,963,585     289,205  
Cash, cash equivalents and restricted cash at the beginning of period 95,334     98,244     14,470  
Cash, cash equivalents and restricted cash at the end of period 125,284     2,061,829     303,675  
       


Contact: minying.cheng@brbiotech.com

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